Dipping into your retirement savings repeatedly could cost you far more than you realise

A safety net used once in a genuine emergency is doing exactly what it was designed for. A safety net emptied annually is something else entirely. And the difference matters enormously when compounded across a working lifetime.

The problem the two-pot system set out to solve

To understand what is at stake, it helps to remember why this system was created. Prior to its introduction, South Africans facing severe financial strain had few options: resign from employment to unlock retirement savings or go without. Countless people chose the former, unravelling years of contributions to get through a single rough patch. The Two-Pot system was built to close off that trap.

The structure is straightforward. From 1 September 2024, one third of retirement contributions flows into a savings pot that can be accessed once per tax year, with a minimum claim of R2,000. The remaining two-thirds go into a retirement pot that remains sealed until retirement. Every withdrawal from the savings pot is taxed at the member’s marginal income tax rate (ASISA, 2024).

The design was thoughtful. A release valve for genuine emergencies, with the retirement component kept firmly out of reach. The data from 2026, however, suggests the relief mechanism is being used well beyond its intended purpose.

2 costs most people do not see coming

When people consider a withdrawal, attention naturally goes to the rand figure. That is the wrong place to look.

The first cost is tax. Savings pot withdrawals are treated as income in the year they are received and taxed at the member’s marginal rate, which can be as steep as 45%. A R30,000 claim does not translate to R30,000 received. For anyone close to a tax bracket threshold, the additional income can tip them into a higher rate, affecting not just the withdrawal but their broader tax position for that year. This is often only discovered at assessment, by which point nothing can be undone.

The second cost is quieter and considerably larger: the permanent disruption to compound growth.

Compound growth works because returns generate their own returns. A rand left invested earns a return. That return, when reinvested, earns its own return. Over decades, this process builds momentum that cannot easily be recreated once broken. A withdrawal does not simply reduce a balance. It shrinks the base on which every subsequent year of growth is calculated, for the remainder of that member’s working life.

For younger fund members, this is especially consequential. A R10,000 withdrawal today may represent several multiples of that figure in foregone purchasing power by retirement. The amount withdrawn feels modest. What it would have grown into does not.

Why people are withdrawing

The temptation to judge repeat withdrawals as imprudent is understandable. The evidence does not support that conclusion.

By early 2026, total savings pot claims had surpassed R60bn nationally. Debt repayment, school fees, and day-to-day living costs account for the most frequently cited reasons. Research by Old Mutual Corporate found that claims are overwhelmingly need-driven rather than discretionary, with 34% directed at basic living expenses, 26% at debt repayment, and 26% at emergencies (FAnews, 2026).

The household context reinforces this. According to Eighty20’s 2025 Q4 Credit Stress Report, as quoted by IOL, 40% of credit-active South Africans are already in default on at least one loan. When formal credit is unavailable and there is no emergency reserve to draw on, accessible retirement savings become the only available option. It is a rational decision within an irrational set of circumstances.

Unfortunately, understanding that does not make the long-term cost disappear.

The shift from emergency access to annual habit

What the data from 2026 reveals most clearly is not the scale of withdrawals, but the pattern behind them.

According to Alexforbes, 67% of members who submitted a claim in the 2025 tax year did so again in 2026. Thirty-one percent have now withdrawn in every tax year since the Two-Pot system began. For a growing portion of the working population, the savings pot has effectively become an annual supplement to income rather than a genuine last resort.

The compounding damage from this pattern is cumulative rather than dramatic. Each year the savings pot is fully drawn down is a year in which contributions accumulate briefly before disappearing, instead of being allowed to compound. The retirement pot continues to grow, but at a slower rate than it should. Over time, the shortfall between what will be available at retirement and what will actually be needed widens quietly, without any single event that registers as a turning point.

That is precisely what makes this risk so easy to underestimate. It does not announce itself. It compounds.

Why staying invested is the stronger position

The economic backdrop in South Africa during 2026 has not made long-term thinking easy. Currency pressure, global market turbulence, sustained household debt, and rising costs have created conditions in which accessing retirement savings feels, at minimum, understandable. In the short term, it often makes practical sense.

The difficulty is that retirement savings are not built for short-term relief. They are built for long-term compounding. And the argument for keeping them intact is not rooted in economic optimism. It is rooted in the mechanics of how growth actually accumulates over time.

Market cycles are temporary. Recessions are followed by recoveries. Currencies stabilise. Political uncertainty, however prolonged, eventually settles. What is far more difficult to recover is the compound growth that was forfeited while those pressures were being navigated. The cost of withdrawing is rarely felt immediately. It registers at retirement, in the form of a balance that is smaller than it could have been.

The evidence on this is consistent. For those with long investment horizons, remaining invested through periods of volatility has historically produced better outcomes than moving in and out of the market based on prevailing conditions. As IOL Personal Finance (2026) notes, missing even a handful of the market’s strongest days over a long investment period can significantly reduce the final outcome. Staying the course, even when it is uncomfortable, is consistently the better position.

A savings pot withdrawal during a difficult period does not neutralise the difficulty. It trades a short-term cost for a long-term one, and the long-term version, accumulated across decades of interrupted compounding, is substantially larger.

Questions worth asking before submitting a claim

The savings pot exists for a reason, and there are circumstances in which using it is the right call. Accessing it once, deliberately, to address an unavoidable emergency is not the problem the data is pointing to.

The problem is the annual depletion. And before submitting a claim, it is worth asking honestly whether the need in question is genuinely immediate and unavoidable, or whether it reflects a structural cash flow gap that a withdrawal will not permanently resolve. Emptying the savings pot into an ongoing debt problem does not fix the problem. It buys time, at a compounding cost.

Several alternatives are worth working through before touching retirement savings: a detailed review of monthly outgoings, a conversation with existing lenders about revised repayment terms, or beginning to build a separate emergency fund alongside regular retirement contributions. Having an accessible, ring-fenced reserve for unexpected costs is one of the most effective ways to protect retirement savings from becoming the default first response in a crisis.

The Two-Pot system represents genuine progress in how South Africa approaches retirement security. Its value depends entirely on the retirement pot being allowed to fulfil its function. When the savings pot becomes an annual income supplement, the system operates as designed, but the retirement outcome it was built to protect quietly deteriorates.

Speak to a financial advisor

If you are weighing a withdrawal, have already made one, or want to ensure your retirement plan can withstand ongoing financial pressure, professional advice is the most valuable step available to you. A qualified financial advisor can model the true long-term impact of withdrawing, surface alternatives you may not have considered, and help structure a retirement and wealth plan that keeps compounding working in your favour, regardless of the economic environment.

At Securitas® Financial Group, informed decisions protect futures. Reactive ones erode them. If the pressure to access your retirement savings is building, speak to one of our advisors first. The conversation is likely worth considerably more than the withdrawal.

Did you find this article insightful? You may want to read Why Investing is Important, But Reinvesting is Essential and How Tax-Free Savings Accounts and Retirement Annuities Fit Into the Picture as well.